Delta’s hidden profit center is jet engine repair

Delta Airlines (DAL), the world’s largest airline by revenue and market capitalization, makes most of its money from carrying large numbers of passengers around the world.

A growing part of the business, however, is the Delta TechOps entity, a maintenance, repair and overhaul (MRO) provider that performs everything from routine maintenance to large jet engine overhauls to upgrades. cabin interior complex.

In Delta’s 2022 annual results released last month, revenue from Delta’s “ancillary businesses” (including TechOps) reached $846 million, with the majority of that revenue coming from TechOps.

Although this is slightly lower than before the pandemic, Delta plans to continue to expand its operations and double its TechOps business in 2023 by opening a new jet engine repair facility in Atlanta with partner Pratt & Whitney.

Delta Air Lines Airbus A330neo or A330-900 with European aircraft manufacturer Neo engine option departing Amsterdam Schiphol AMS EHAM International Airport. (Photo by Nicolas Economou/NurPhoto via Getty Images)

According to Delta, the facility will be dedicated to servicing the Pratt & Whitney GTF engines that will power Delta’s new fleet of advanced Airbus A321neo and A220 aircraft.

“It’s a great day at Delta TechOps as we launch this new engine shop,” Delta COO John Laughter said in an interview with Yahoo Finance. “This is our TechOps team’s continued progression into next-generation engine platforms, [and] it goes well with our fleet.

The new engine shop will not only service GTF engines for Delta aircraft, but also the engines of the customers Delta serves through its TechOps MRO business. It’s another way for Delta to improve its bottom line, with revenue coming directly from its competitors.

“This is another revenue stream for Delta,” says Laughter, adding that TechOps is something Delta “has invested in for over 20 years; Expand our third-party capabilities. »

While Laughter declined to name the margins, he noted that the MRO business is particularly good because these are high-tech repairs that specialist technicians work on, and service work at this level takes time and investment. . This leads Delta to charge high fees for the work performed.

Laughter says the new facility will perform more than 10% of Delta TechOps’ GTF engine overhauls in its first year and will grow to 400 GTF engine overhauls per year when it reaches full capacity.

And that’s just the beginning. Soon, TechOps will not only be able to service Pratt & Whitney GTF engines, but also Rolls-Royce (RR.L) Trent and CFM LEAP (GE) engines – Delta TechOps are in an enviable position.

“These are the new, efficient, quiet and fuel-efficient next steps in sustainable engines, and Delta will be the only company in North America capable of handling all three platforms,” Lacher said.

Pras Subramanian is a reporter for Yahoo Finance. you can follow him Twitter and further instagram.

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